Setting up a Thai Limited Company is an important first step for foreign investors. The process involves several steps, including the reservation of a company name at the Department of Business Development (DBD).
The next step is to prepare and submit a Memorandum of Association. This document will contain the company’s name, purpose and location. It will also state the number of shareholders and directors.
Company Name
As a country in the heart of Southeast Asia, Thailand offers investors access to a sizable consumer market of over 69 million people. However, establishing a business in this popular destination requires knowledge of the nation’s complex regulations and language requirements.
Acclime can guide entrepreneurs through the entire registration process without the need for a Thai translator. Our professionals are experienced in the various business structures available in Thailand.
The first step is reserving a company name through the Department of Business Registration. This process can take up to three days. Certain names are prohibited, including those associated with the royal family or government agencies, those close to the name of an existing company, or those that are against public moral. The next step is arranging a statutory meeting to create the company’s by-laws and to choose its directors.
Memorandum of Association
The Memorandum of Association is a legal document that defines the company’s objectives, limits its activities to those permitted under law, protects shareholders and facilitates capital raising. It also sets the limit of liability of the company and its members.
A well-drafted MOA will not only help in a smooth process of company registration but also ensure that the company is not violating any existing laws. It should be prepared before applying for the registration and signed by the founder members of the company.
A registered MOA provides credibility to the company and ensures that third parties can examine the information regarding its financial status, directors, shareholders, etc. Any unauthorized activity may be deemed ultra vires and the company, its directors, and shareholders may be liable for penalties.
Shareholders
When registering a company, it is important to determine the ownership structure and the number of shares allocated to each shareholder. The shareholding proposition, value of each share and total company capital must be documented in the MoA. At least 25 percent of the subscribed shares must be paid up in order to start operating a business.
In addition, the company must also specify whether it will issue ordinary or preference shares. Ordinary shares give shareholders voting rights in the company, while preference shares are entitled to receive dividends before ordinary shares and have priority over asset claims when the company is dissolved.
It is also important to ensure that the company complies with accounting and auditing regulations. This will ensure transparency and financial accountability, promoting trust among stakeholders.
Directors
Directors of a Thai limited company are responsible for the overall operations of the business. These individuals are also accountable for submitting corporate tax (value added tax) and follow accounting procedures.
A director’s liability is capped at the value of their share. This structure provides a clear separation of responsibilities and liabilities between shareholders and the company itself.
Foreigners are allowed to own up to 49% of the shares in a private limited company. However, some businesses require a higher percentage of Thai directors.
Accounting
A company must adhere to accounting practices to ensure transparency and adherence to tax obligations. These requirements include annual balance sheet submissions and compliance with tax regulations. A well-detailed outline of the company’s objectives must also be submitted for registration.
During the process, it is also advisable to consult with local experts. These professionals can help navigate the complicated language and documentation requirements of official paperwork.
After registering, the company must submit a report to the Department of Business Development within 30 days. It must also obtain a tax identification number and VAT registration, if applicable. The company must also comply with monthly reporting requirements. Failure to file reports can result in monetary penalties. The company must also appoint at least one auditor. It must present its financial statement to the ordinary shareholder’s meeting for approval within four months of the closing date.
